GDP report: Brazil’s economy off to a good start in 2023

Brazil is set for a record-setting soy harvest. Photo: Alf Ribeiro/Shutterstock

Brazil’s GDP grew at an annual rate of 4 percent in this year’s first quarter, according to data released Thursday by the Brazilian Institute of Geography and Statistics (IBGE). From Q4 2022, the economy expanded by 1.9 percent — bouncing back from a quarterly variation of -0.1 percent at the end of last year.

On the supply side, bumper harvests from farms boosted overall numbers. On the demand side, a resilient labor market has seen workers’ incomes rise above inflation. In addition, higher transfers from social programs also helped sustain Brazilian household consumption despite high debt levels.

The results exceeded expectations, even as institutions surveyed by the Central Bank recently began to upgrade their outlook for the Brazilian economy. Days before the official data, the median market forecast, according to Refinitiv, pointed to 1.3 percent quarter-on-quarter growth in the first three months of this year.

Brazil’s Institute of Applied Economic Research (Ipea) is among the more optimistic institutions. “The market has adjusted its expectations to a scenario that we identified before them because of our close monitoring of agriculture and livestock,” says Julia Braga, Ipea’s coordinator of studies and macroeconomic policy.

In a March 31 report, Ipea predicted GDP growth of 1.2 percent quarter-on-quarter in Q1 and 2.7 percent for the year (already anticipating a big boost from agribusiness output, which Ipea saw growing by 13 percent).

As high as Ipea’s forecast may have been, the actual results obliterated those expectations, with agribusiness posting a whopping 21.6 percent quarter-on-quarter growth rate — the highest since 1996. The services sector, which accounts for the greater share of Brazil’s GDP, also grew slightly above expectations, up 0.6 percent quarter-on-quarter and 2.9 percent year-on-year.

The manufacturing sector, on the other hand, remained flat, contracting by 0.11 percent quarterly. The stimulus measures announced by the Luiz Inácio Lula da Silva administration a week ago are only expected to take effect in the second half of the year.

Agricultural boost to the GDP

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Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.